Cisco Will Go Higher On New Improved UPOE In 2013

| About: Cisco Systems, (CSCO)
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Cisco (NASDAQ:CSCO) is still managing to hold on to the number one position in the networking market. Huawei, a China-based competitor, has been edging its way into Cisco's market, however. Huawei is currently ranked number two in the world, lagging just behind Cisco.

Huawei has also sowed its seed in the United States, with operations along the east and west coast. However, the current relationship between the U.S. Government and Huawei is a tenuous one. Because Huawei has close ties with the Chinese government and military, the United States wants to keep Huawei at arms length away from its nuclear weapons. I believe this could be damaging to Huawei's hopes of breaking into the U.S. market.

More small time competitors have also appeared, eager to get a slice of the pie. However, Cisco has done an excellent job cleaning up after itself. Compared to companies like Alcatel-Lucent (ALU) and Juniper Networks (NYSE:JNPR) which have floundered the past quarter, Cisco has done quite well, reporting an 11% gain compared to Alcatel-Lucent's 8% loss and Juniper's 6% loss.

My opinion is that smaller companies like Alcatel-Lucent and Juniper don't pose much of a threat to Cisco in its current state. Even larger international companies like Huawei have only managed to shake Cisco a little. However, in the long run, that may be a completely different story. With the proper amount of growth and development, these companies can become a thorn in Cisco's side.

The fact that Cisco has still managed to stay on top of the global market means something. Cisco is prepared to innovate and invest in new ideas and veteran entrepreneurs. Insieme, a start up project funded by Cisco, is working on creating a new approach to Software Defined Networking (SDN). SDN is taking the networking tasks that were previously done on machines and transmuting the process to be done on software. SDN is no doubt a large slice of the future, and Cisco is quick to muscle its way into the market with its subsidiary company, Insieme.

Another major invention is the new Universal Power over Ethernet, or simply UPOE. UPOE is simply powering your electronic devices using an Ethernet cable rather than the traditional electrical outlet. Although this concept is not new, it is definitely a huge improvement over Cisco's last product, Power over Ethernet, which only offered 7 Watts of power. The new and improved Universal Power over Ethernet has capabilities of up to 30 Watts. The newfound power is giving rise to new technologies, from virtual desktops to making compact switches more accessible. The positive reception for UPOE will help with sales and investment.

The Universal Power over Ethernet is creating a market unto itself; it makes new technologies possible and old technologies easier to use. This gives Cisco a definitive edge over its competitors which don't have the same kind of technology. My expectations is that the Universal Power over Ethernet will help Cisco's stock in the short and long run.

Cisco is currently working on a deal with Fusion-io (NYSE:FIO) to have Fusion-io embed its memory cards into Cisco's servers. If the deal goes through, Cisco will account for 10% of Fusion-io's customers. This is expected to take place within three or four quarters. This deal feels like a win-win situation to me. The deal, when finished, should be a huge deal for Cisco, so check back on the details as they're worked out.

Another company Cisco has been dealing with is ZyEdge. ZyEdge has gained TelePresence Video Express Authorized Technology Provider (ATP) status from Cisco. In short, this states that ZyEdge is qualified to sell Cisco TelePresence Video merchandise. As the name suggests, the TelePresence Video Express is a improvement on the work-at-home concept. It allows easier collaboration between two or more people who are situated in different locations.

However, Cisco is not the only one interested in the video conferencing market. Radivision (NASDAQ:RVSN), which was recently purchased by Avaya, has just put out its SCOPIA XT series, a serious contender for the market. Other companies like Polycom (NASDAQ:PLCM) have got to step its game up if it wants to take a slice of the market.

Similar to ZyEdge, ePlus (NASDAQ:PLUS) has renewed its Video Surveillance ATP status with Cisco. The collaboration between ePlus and Cisco represents the interconnectedness of hardware and software. More and more companies are likely to follow in Cisco's footsteps of merging the two into one.

Cisco's ATP Program helps Cisco find partners in the global market. The ATP Program is mutually beneficial to both companies, and it helps Cisco to set the standards on new ideas, technologies, and products. This is essential in the ever-changing market.

Cisco dominates the networking market, providing services that range from retail to government to finance. This is unlikely to change any time soon, even with the surge of smaller networking competitors. Cisco's innovation and adaptation ensure that it will never fall behind its competitors.

Cisco's innovation should keep it as a popular stock for the time to come. If you're looking for a cheaper buy in the tech industry, at less than $20 per share, Cisco may be your golden ticket.

Keep watch on the details of the Fusion-io deal, as the details are still relatively unknown. Of course, the development of Cisco's UPOE will also be a huge factor in the company's success, so make sure there are not any setbacks soon with that development. Assuming these processes go off without a hitch, look for Cisco to keep moving forward. It should then, with ease, leave Alcatel-Lucent and Juniper far behind and create some breathing room between it and Huawei at the top.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.